Credit Suisse Sees Equities Rising Further Next Year on Economy

Credit Suisse Group AG says it’s not too late to join the stock-market rally as an accelerating global economy drives gains into 2018.

“Even after a year of exceptionally good returns in risk assets, Credit Suisse investment strategists believe that global equity markets have further upside potential in 2018,” the Zurich-based bank said Thursday in its investment outlook for next year. “Economic growth is expected to remain robust in the months ahead, supported by both advanced and emerging markets.”

Stocks globally have been on a tear. U.S. stocks reached all-time highs in the run-up to the Thanksgiving holiday, while the MSCI Asia Pacific Index surpassed its 2007 peak based on closing prices. The Asian equity gauge has outperformed its U.S. and European peers this year, led by surging Chinese stocks such as China Evergrande Group and Sunac China Holdings Ltd.

Credit Suisse — which generally favors equities over credit — said emerging-market stocks will probably generate low double-digit returns in 2018, with small caps likely to lead the way. Japanese and Swiss shares are seen offering the best potential in developed markets. Preferred industries include healthcare, financials, telecoms and industrials. The bank also highlighted euro-zone real estate equities.

Bond yields in most developed markets will probably rise moderately, with U.S. 10-year yields reaching 2.7 percent by the end of 2018, Credit Suisse said.

“Corporate capital spending, merger-and-acquisition activity and, in turn, increasing corporate debt look set to become big topics in 2018,” Credit Suisse Global Chief Investment Officer Michael Strobaek said. “We expect 2018 to be a relatively good year for economic growth, which should help growth-sensitive assets continue to do well.”

Other calls include:

Federal Reserve tightening may stabilize dollar, but likely upward adjustment in European yields suggests the euro could extend gains
Robust growth will stoke demand for commodities, with oil trading in a range
Corporate capex seen as important driver of overall economic growth
Other developed-market central banks set to join “normalization bandwagon;” removal of stimulus could create pockets of volatility in currencies, equity and credit
Steady adjustment process and currency stability seen in China
Source: Bloomberg